Energy Markets Trying To Find Floor After 4 Straight Days Of Selling

Energy markets are trying to find a floor after 4 straight days of selling pushed crude oil prices to 3 month lows and gasoline prices to their lowest levels of the year. RBOB gasoline futures are trying to lead a modest recovery rally this morning, trading up just over a penny, after the November contract lost 15 cents in the first 4 days of the week. ULSD futures are resisting the pull from gasoline and crude so far, trading down around half a cent, stretching the weekly drop to almost 18 cents/gallon.

Colonial pipeline was forced to shut down its main gasoline and diesel lines for a few hours Thursday due to unplanned maintenance. That news sent a brief bit of worry through markets and pushed RBOB futures into positive territory for a few minutes before it became clear the shutdown had more to do with an internal fix than something more dramatic like the cyberattack that shut the system for nearly a week in 2021. Once the word spread that operations would resume shortly, the selling in futures picked right up where it left off.

Chevron’s 290mb/day El Segundo refinery had an explosion and fire around 9pm Thursday night, which was still burning Friday morning. While refinery fires typically create dramatic photos and video, company officials are suggesting that this blaze was contained to a single Hydrocracking unit, which is patented by Chevron as an ISOMAX unit, which cracks heavy material into Jet fuel.

LA diesel basis values had come under heavy selling pressure in recent weeks, dropping from a 26 cent premium to futures September 10th to a 5 cent premium yesterday. That sharp drop in LA diesel basis had re-opened the spread between southern California and Northern California prices to their highest levels since June, but if the El Segundo has the buyers out in force today, that arb window may slam shut in a hurry. Then again, if only the Hydrocracking unit is impacted, the output impacts may be limited to Jet Fuel, while gasoline and ULSD production may not be directly impacted.

The September jobs report is delayed due to the ongoing government shutdown. There’s also speculation that the shutdown will further delay the final announcement on Renewable Volume obligations for 2026 and 2027. RIN values have rallied back to around the $1 level for D4 and D6 contracts after trading down to 3 month lows earlier in the week.

Ukrainian drones hit another Russian refinery overnight, this one more than 800 miles from the border. A WSJ article earlier in the week suggested the U.S. would be providing intelligence to Ukraine to aid in long-range missile strikes against Russia’s energy infrastructure.

The NHC continues to track 2 potential storm systems in the Atlantic basin. The first near Florida looks like it will just be a rain-maker as it is only given 10% odds of being named, but the other moving across the Atlantic has gone from 20% odds of development yesterday to 40% today.